Backloading still on the cards as ENVI votes 'yes'
The Parliament Environment Committee (ENVI) today voted in favour of the Commission's proposal to allow backloading in the EU's Emissions Trading Scheme (ETS).
This is a reversal from the European Parliament's decision, which voted against the proposals in April, and experts believe this increases the likelihood of a positive vote in Plenary on July 3.
Thomson Reuters Point Carbon senior analyst Hæge Fjellheim said: "When we compare today's results to the ENVI vote on February 19, we see a much stronger chance of an increased number of Parliamentarians supporting backloading in Plenary in July"
"And despite the Green Party's initial reluctance to the amended version of backloading, we expect they'll support the Plenary."
Backloading is the Commission's proposal to freeze 900 million allowances from the market over the next two years in a plan to push up the price of carbon and make low carbon investments more attractive.
A report recently published by research group, Policy Exchange, If the Cap Fits, says that the ETS is currently too weak, which could lead to a surge in new coal generation and will also fail to meet the European Union's own carbon reduction objectives.
However, according to Fjellheim significant delays are now likely and backloading is unlikely to be implemented before mid-2014.
In addition, even if backloading is implemented Thomson Reuters Point Carbon believes necessary amendments will not reduce any oversupply in the market nor benefit the environment.
Thomson Reuters Point Carbon senior analyst Marcus Ferdinand said: "If today's result should be the final outcome of the political process, EUA prices will remain in the single-digits for the rest of phase 3. Our main conclusion is thus that any backloading in line with the ENVI proposal will only have a marginal impact on prices, and no environmental benefit."